Archive for September 2012

Two days back I participated in a big debate on impact of recently announced FDI in retail on cold chain infrastructure in India. A specialty magazine for the distribution and logistics scene in India had organized this debate at one of the chambers of commerce in India. Three gentlemen including a self-proclaimed cold chain specialist, an omnipresent agribusiness consultant, a retired CMD of a nationalized bank, apart from yours truly, debated on the subject which was moderated by the editor of the said magazine. Cameramen captured the hot and cold moments of the proceedings for posterity.

Like always since 1987, the year I entered the organized fruit and vegetable industry, the discussion on the subject invariably turns to proverbial 30-50% wastage of fruit and vegetables in India because of absence and / or suboptimal presence of cold chain industry in India. This wastage story is so sticky that it has now become ingrained in minds of every one who has anything to do with food and agriculture in India. No points for guessing – FDI in retail was the only panacea for this ill called f+v wastage as per our self-styled cold chain specialist and the agribusiness consultant. But this is not what I want to discuss here. Though I have always contested the 30-50% figures as physical wastage for the simple reason that everything (all qualities and grades) sells and have a market in India. Overall value loss – yes, agreed or product specific wastages – like onion stored in a traditional way –yes, agreed.

Yes, it was the onions with documented 30% plus wastage during storage that started a chain of thoughts while I started driving back to my office. What follows are my instincts derived through my sectoral experience of fresh produce wholesale and retail in India.

Let’s come back to the title of this post. ‘Wastage is good”… Just visualize and try to create a scenario on what would happen if one fine day in Year 1 the wastage in onions during storage in Maharashtra / Gujarat etc somehow (let’s say because of technology intervention) gets down to zero to from 30%. What could logically happen?

3. The dipped prices could perhaps be lesser then the production cost of onion resulting in huge trading loss to farmers. More suicides perhaps!

(I recalled what a Malegaon farmer told me when I did a onion research for NCAER / IDFC last year. His exact words were – No one in Cities has ever died of eating costly onions but low onion wholesale prices have definitely taken lives in Maharashtra).

4. Reduced storage capacity and unemployment in people associated with onion storage.

5. Extended storage could reduction of interstate movement of onion as geographical arbitrage would be missing which will also reduce the onion areas in States like Rajasthan from where onion starts arriving when onion in stores ends in Maharashtra.

6. Excessive onion dehydration because of excessive availability and resultant bubble as equilibrium of flakes market will be broken.

Till I reached my office I continued to weave plethora of scenarios around excess onion supply. You can perhaps add more. Eventually I could only reach to one conclusion that “Wastage is good” in case on onions in India. May be it is not the lack of capital, knowledge and resources that has prevented Indians into investing in Onion storage mechanisms that reduce wastage but have a potential to disturb the market mechanisms.

How I wish some econometric algorithm could churn up the most likely scenario in a situation of excessive onion in the market. Are you listening NCAER?

In a way the issue of more onion supply in not much different from excessive money supply. Excess money (current chairman of Federal reserve in USA would calls it quantitative easing – printing more money in bank’s printing presses at the most base level) can solve most of the issues at individual level but on a higher level, say a nation, more money can create as many complications not only for the nation but also global sometimes. There are many instances in history where too much money led to serious and damaging consequences, such a hyperinflation and assets bubble. The bubble in the property market in USA in 2008 that caused a butterfly effect across the World, was one such consequence of excessive money supply leading to lower interests in USA. Excessive onions are no different from more money supply.

I once again repeat – above said is based on my instincts. I have seen potato and onion rates crashing at the macro and micro level because of excessive supply in the wholesale markets.

Many a times instincts derived through experience are more accurate than research. I remember reading somewhere that test methodologies called agile and rapid, has lot to do with decisions based on instincts made on the fly. These are very effective methodologies. I just see a huge pool of information on food wastage which we need to mine to create more thoughts for food, particularly food for the farmers and by the farmers.

On a wintry evening in 2005 I had just arrived at Vadodra airport for the flight back to Delhi after finishing a meeting with a top (arrogant) gun at NDDB in Anand. I was in for a bad news when it was suddenly announced that all flights moving out from Vadodara were cancelled because of some unforeseen air force exercise in the vicinity of airport. While the passengers harangue with airline staff continued I sat sulking in the corner with the book I had purchased from Delhi airport in the morning.

Suddenly I saw silhouette of an old man with a slight limp with a hand on a young girl’s shoulder coming inside the departure lounge. Though I was too tired to ponder upon old men and young girls… when, lo and behold! Old man turned out to be Dr. Verghese Kurien himself. What a nice and pleasant surprise!

Despite the circumstances at airport, his presence somehow cheered me. I spoke to myself – here’s is the man who was responsible for making me, the only son, leave my home town, quit a well-paying State Government job and least of all make my father very angry and anguished for years to come.

Dear readers, you might be wondering how a renowned man like Dr. Kurien could act and behave in a way which is very much unbecoming of a gentleman. Read on…

We were following Americanized trimester system of education at Punjab Agriculture University, PAU for short – my alma mater. In fact trimester system was a misnomer because there was always summer session at the end of last trimester, each year for four years. This summer break was reserved by University for practical field trainings and study visits and of course many extracurricular activities.

One such study visit during summer break of 1975 took us, the young impressionable minds, to Anand to visit Amul and NDDB campus. By virtue of our coordinating professor’s brother, a senior official at NDDB at that time, a small lecture by Dr. Kurien, the then Chairman NDDB, was arranged for us. The lecture lasted for not more than 20-25 minutes but at the end of discourse I was so much impressed (or should I say corrupted) that there and then I decided that after completing my studies at PAU if I ever get an opportunity to serve directly or indirectly this gentleman called Kurien I will grab same no matter what ever the consequences.

During those years, pseudo intellectualism, the pop music, new found love for existentialist European literature and of course Ayn Rand had steered my mind in such a way that Dr. Kurien’s words “I always keep my resignation in my pocket” kept haunting me for long. Dr. Kurien had actually pulled out a piece of paper from his shirt pocket when he was extolling the virtues of integrity and trust in one’s own judgment in front of us.

I got this opportunity in 1980 and joined NDDB as an Executive Trainee meant for seconding in Punjab, my home state. To state that I got the opportunity would be an understatement – I was a serving Inspector, a prestigious and powerful Government post – and best of all stationed at my home town in my home state. Moreover, I was sitting on an offer to join as a Probationary Officer with State Bank of India, another prestigious offer which my father, an accountant by profession, would have loved me to accept. But dear readers, confiscating adulterated fertilizer and sanctioning fat loans was not for me – my destiny had already been written by man called Dr. Kurien.

I continued to serve NDDB and its affiliates like Milkfed, Mother Dairy, Safal and Safal Market till 2006. My exit from NDDB was also somehow programmed by Dr. Kurien.

Getting back to the Vadodra airport where I started this post, I could not stop my urge to meet Dr. Kurien and seek his blessings for the new Safal Market project that we were about to commission in Bangalore. I put up a cheerful face and reached the bench where Dr. Kurien was sitting motionlessly in deep thoughts. After excusing myself for the unsolicited interruption I introduced myself, my current project and also cheerfully narrated the above story of my joining NDDB. In addition I praised him profusely for having done so much work selflessly for the farmers and the country. Dr. Kurien kept listening patiently. While I was about to leave, he suddenly pulled me down towards himself and suddenly said, albeit out of present context “they are intent on throwing me out”. Such an anguish and pain could come only from a proud man. Knowing fully well the ongoing power tussle going on at IRMA and NDDB I humbly agreed to his point and moved back to my seat. However, that was the precise moment when I decided to call quits at NDDB. Enough of NDDB. Kaput. I reasoned that NDDB has lost its raison d’être and the pillar it was standing on.

I encashed the first opportunity Ravi Subramanian, the CMD of Subhiksha, gave me when he asked me to handle Subhiksha’s first ever fresh produce multi outlet retail venture in Delhi and other Sates of Northern India.

“I always keep my resignation in my pocket” kept haunting me for long. These powerful words still echo in my ears as I lay reading tributes paid to this gentleman who is no more.

Though Dr. Kurien was no longer part of NDDB since last so many years, but I am sure NDDB will continue to reap the goodwill created by Dr. Kurien’s and his charisma for time to come. Dr. Kurien’s legacy, placing the marketing tools in the hands of farmers and Amul’s legend will continue till the time people like me continue to replicate and perpetuate the Anand pattern though their work and consulting assignments.

Vietnam campus of the ‘Asian Institute of Technology’ in Ho Chi Min City (HCMC) (http://bit.ly/OQRpqB) has successfully organized a 3-day training course recently on “International Trade Environment of Fruit and Vegetables – one of the potential export products categories of Vietnam”.

I facilitated and conducted the training with marvelous support from an interpreter and translator in Mr. Khang Nguyen, who not only interpreted and translated my spoken and written words, but also mimicked my newly found trainers’ enthusiasm and body language.

It would be pertinent to add here that it was only because of commendable efforts and tenacity of Ms Nhien, who contacted me in a faraway country, I had this opportunity to visit Vietnam, a beautiful country, share my trade experiences with witty professionals and best of all, make friends with many lively Vietnamese folks. I can’t thank you more Ms. Nhien.

The training course was conducted by young Ms Nguyen Phuong Thao with such a élan, that is worthy only of a seasoned professional who has seen scores of seasons going through similar training routines. Keep it up Ms. Thao!

(Ms. Thao and Mr. Nguyen, you made my days in Saigon. If it were not you, I would have been completely lost in a communication vacuum. Thanks for your excellent support. The World is language neutral because of people like you.

Coming back to event in context – AIT’s course content addressed the need to assist enterprises, governmental agencies and industry associations to build up capacity of their high level staff that included company directors, senior and middle management, officers and experts who work in the field of cross border trading, exports and promotion of fruit and vegetable products.

Looking at the composition of participants, their familiarity with the subject and their diverse training needs, I intentionally choose the middle path by starting with a broad overview of International Fruit and Vegetable trade, followed by granular view of Vietnam’s fresh produce exports that culminated in identifying Japan as the most promising and potential trade partner. Whole workshop was interspersed with case studies, assignments, group discussions, QA sessions, video presentations etc. – all excellently transferred to participants by Nugyen. While recognizing that rebuilding of export oriented value chain shall be imperative if Vietnam wants to turnaround its export performance for a developed country like Japan, a mythical value chain turnaround plan was hurriedly build and presented to the participants to apprise them of various steps needed for project identification, capacity building, formulation and design for such a plan. The training course culminated with small teams of 4 members each developing and presenting their own fictitious fruit and vegetable export oriented projects, like initiation of dragon fruit export from Vietnam to Middle East.

In retrospect I may add that the cross-border value chains, especially the chains that include many partners and stakeholders from developing and developed countries, are rather complex since many differences in social, technological and commercial aspects exist between these partners that influence the success of a supply chain. Trust and commitment and a will to survive and succeed are crucial elements to achieve partnerships, chain integration and chain optimization. Because of the different trade environments in which cross-border supply chains operate, chain partners have to deal with several trade rules, regulations and laws, a large logistic network, different levels of technologies, etc. Awareness and knowledge of each other’s ground situation and building / executing action plans is a very important.

Last thoughts…

In less than four days we could talk only of few strategic steps for streamlining fruit and vegetable supply chain in Vietnam. Time was too short to build plethora of strategic options and execute any strategy. A strategy does not mean anything unless executed and executed well which in turns depends upon people and operations, the detailed action plans. The heart of the working of a business, Vietnamese exporters no exception, is how the three processes of people, strategy, and operations link together. Businesses have to master the individual processes and the way they work together as a whole. They are the foundation for the discipline of execution, at the center of conceiving and executing a strategy. They are the differentiation between Vietnamese exporters (or exporters / businessmen from any other country) and its competitors and its closeness to its customers.

Considering many requests from participants and sponsors I am posting here few of the select presentations I made at the event.